Social Networking Strategies For Small Businesses

Rodney Rumford was not in the greeting card business when he first explored Facebook. But Rumford, a Net-savvy consultant, hatched a new venture by setting up a business within the world's second most popular social network.

Since launching Cool Greeting eCards as a Facebook application, Rumford's applet has had 110,000 installs--not a record but still an impressive start. "I have never seen a way to gather users faster or cheaper," says Rumford, CEO of Gravitational Media. For launch, his team of 10 workers created 100 new greeting cards, including high-quality audio clips, and now offers more than 150 cards.

Though Rumford has dabbled in the greeting card business, he says "a number of people have approached us and wanted to purchase it." The lesson is clear--social networks are a business and marketing platform with low barriers to entry and a bevy of potential revenue-generating possibilities.

For smaller businesses, social networking isn't a shortcut to success. However, it offers an intriguing platform for customer, employee and supplier relationship management that can serve not only existing connections but also help to identify new prospects.

Not every firm is ready to exploit the advantages of engaging with customers in a social setting. Constant Contact, a 10-year-old provider of e-mail marketing tools, regularly held customer dinners in various cities to become better acquainted with its customers. Company representatives noticed that clients attending these gatherings had little in common beyond an interest in communicating with their customers electronically, but they were eager to exchange business cards with one another.

"We wanted to make it easier for them to share information," explains Maureen Royal, director of community, Constant Contact. Those observations lead to the development of ConnectUp, online customer forums hosted by Constant Contact, where members introduce themselves and exchange advice about the best ways to use electronic communication channels.

And like a social network, Constant Contact provides greater recognition to its most influential and active participants. The site has 14,000 members, a fraction of a public social network, but a very healthy percentage of Constant Contact's customer base.

The key business advantage of ConnectUp is its role as a retention tool. "By giving customers a voice, they feel like they are contributing to our product direction and they feel vested in our success," says Royal. "The chances of them leaving are pretty slim because they feel they are helping [our product] to become special."

In a way, Constant Contact's experience is prototypical of smaller businesses: Most stumble into social networking. Unlike Constant Contact, however, few take the time to draft a formal strategy--or even to identify business goals.

Assuming that no formal strategy is in place, it's pretty much everyone for himself. "Best practice No. 1 is management has to do it," says Tom Austin, a VP and fellow at Gartner. "It can't just be individuals."

One of the challenges of mastering social networking is determining where to invest your resources--time, energy and possibly capital, too. As you gain personal experience using Facebook, LinkedIn or dozens of other networks, you can begin to identify--and ultimately prioritize--the universe of possible initiatives to enhance your career, brand, staff and revenue.

Reviewing the commercial spectrum of social networking opportunities reveals seven gleaming goldmines and lurking landmines for smaller businesses that pursue social networking initiatives. Here are five:

1. Prospecting on a Social Network

Goldmine: The marketing potential of a social network is undeniable. Potentially, it's an enormous database of prospects, and some of those prospects are future customers, suppliers or even employees.

Landmine: "Using social networks for cold calling tends to be a really bad practice. People on the Web just don't appreciate it," says Gartner's Austin. "There may be opportunities to mine social network information and contacts identified through social networks, but it requires some subtlety." For example, it's a good idea to do favors for others on social networks, such as recommending suppliers or former co-workers. That's what some refer to as "paying it forward."

2. Sourcing Talent on a Social Network

Goldmine: If your business suppliers or employees use the Internet, social networks are a great place to find them--cheaply. Consider that a retained search can cost anywhere from hundreds to thousands of dollars, but a basic membership to, say, LinkedIn is free, and for $19 to $50 a month you can buy the right to e-mail any one of millions of its members.

Facebook has no membership fees, but discovering information about members requires more active involvement. "A lot of our small and large clients are actively mining networks and identifying potential hires," says Austin. Hiring managers also "run through networks of people to get independent confirmation of [a candidate's] skills, capabilities and attitudes."

Landmine: If your firm's target suppliers or new hires aren't on a social network, then of course you are wasting your time looking for them there. Still, it's no big investment on your part to test the waters.

3. Building Widgets for Social Networking Sites

Goldmine: By now, Facebook widget success stories are legendary in Silicon Valley and beyond. Take widget provider RockYou.com, for instance, which touts: "Founded in 2006, RockYou has over 35 million users, serving over 180 million widget views per day in more than 200 countries."

The young company has been valued at more than $200 million. And yet, what it's doing isn't rocket science. Many social networking widgets are built in a matter of a few weeks; they're advertising supported and spread virally (if they're good) across social networks. "The barriers to entry are very low," says Austin. "There are a lot of opportunities to market yourself, your company and add value in [your] overall business ecosystem through making widgets available."

Landmine: Application development is risky, particularly when your brand name is at stake. Forrester analyst Jeremiah Owyang recommends a phased-in approach. "SMBs can benefit by first sponsoring existing successful widgets, and then as they become more comfortable, integrate their brand with the interactive experience," he says. "After completing this, brands should consider building their own. Because widgets are different beasts from traditional Web sites or micro sites, brands should lean on experts to build, deploy and manage them."

4. Building a Custom Social Network for Customers

Goldmine: This is a classic build or buy decision. The good news is that available tools for discussion forums and social networks, such as Ning.com, are fairly strong. In Constant Contact's case, the ConnectUp site taps into an existing need of their small and midsize business customers. Says Owyang: "Brands should develop their own social network if they are trying to support their customers, embrace them to build better products or to glean insight from them. On the flip side, they should join existing Web sites to improve marketing, word of mouth or also to learn from communities in their native environment."

Landmine: Building a custom social network is a risky proposition. "Sadly, many marketers make the wrong choice," says Owyang, "resulting in an empty community or, worse yet, brand backlash." Gravitational Media's Rumford adds, "The question to ask yourself is--is it worth the time, effort and money to create [a custom social network] yourself or can you leverage what already exists in Facebook for a much lower cost and quicker time to market? If there's unique functionality that Facebook doesn't offer, then building my own might be the option."

5. Building a Custom Social Network for Employees or Suppliers

Goldmine: Just as with custom social networks for customers or prospects, there are myriad technologies to build a community for employees or suppliers. But the ROI on social networks for employees adds up a bit differently than for externally facing sites. "Creating an internal social network is one of those critical best practices for getting the most out of high-value employees, retaining them for longer and making them happier," says Austin. "Socializing is a critical part of getting to know other people, improving working relationships."

Landmine: A custom social network for employees or suppliers is a cost center, so the risk is spending money to build a custom solution. The wisest course of action is to start with open source forum software or free social network tools, such as Ning, and add custom features as the need arises.